Market segmentations are the maps you need to navigate the world of marketing. But as anyone with even a passing interest in cartography knows, there are many ways to describe the complexity of three-dimensional reality in a two-dimensional representation – and every projection is compromised in some way or another. While segmentation is well understood and widely used in consumer goods companies, the ins and outs of retail can easily turn segmentation into an expedition into the wilderness. For one thing, retail as a business is a lot less homogeneous than FMCG across regions and countries. What is more, with its continual fast cycle of testing and learning, the pace of change in retail marketing is much more rapid than in the management of international consumer brands.
Additionally, the questions that segmentations need to answer differ greatly between retailers, or even between different categories. For example, grocery retail is all about location. In high-involvement, low-frequency categories such as fashion or electronics, however, the key is the range and type of brands and products featured in a specific format.
Yet we believe that a robust consumer segmentation is as advantageous to a retailer as it is to a consumer goods company. While the objectives and uses may be slightly different, the strategic relevance is the same. In this chapter, we will focus on what it takes to make segmentation matter in ...